Tech Companies Drop Mandatory Arbitration Clauses for Sexual Harassmenbt Claims in New York and Elsewhere

Courts routinely encourage litigants to use alternative dispute resolution (ADR). These methods offer some advantages, such as avoidance of long backlogs in the court system, but some common features of ADR tend to favor employers over employees. ADR procedures, for example, are private, and often include nondisclosure agreements that prevent New York City sexual harassment attorneys or their clients from discussing or disclosing details of their cases. This can put other employees at a disadvantage, as it keeps important information about their workplace secret. Recent amendments to New York state law seek to prohibit mandatory arbitration of employment disputes involving sexual harassment claims. That law, however, could be subject to a challenge under federal law, which is far more amenable to mandatory arbitration. It is therefore welcome news that several tech companies, many of which employ thousands of people in New York, are voluntarily dropping mandatory arbitration of sexual harassment claims from their employment agreements.

Sexual harassment in the workplace is considered a form of unlawful sex discrimination under the New York State Human Rights Law (NYSHRL), as well as federal and New York City law. Employment contracts requiring arbitration of disputes effectively bar employees from taking their claims to court. An arbitration proceeding resembles a trial in many ways, but various features—from the choice of arbitrator to the cost of the process—are often favorable to employers. The use of nondisclosure clauses also often benefits employers more than employees. If the results of an arbitration proceeding are kept confidential, it could mean that important information about an employer is not available to employees and prospective employees.

The Federal Arbitration Act (FAA) of 1925 establishes a strong preference for arbitration of disputes, and agreements among parties to submit disputes to arbitration. The statute declares that an agreement to arbitrate is “valid, irrevocable, and enforceable” as long as it comports with the general laws governing contracts. 9 U.S.C. § 2. Courts must stay proceedings brought by a party to an arbitration agreement upon the request of any other party to that agreement. The statute directs courts to confirm arbitration awards as court orders, except in very limited circumstances. Courts may only vacate an arbitration award if a party can show fraud, coercion, corruption, or other misconduct by an arbitrator. They may only modify an award upon a clear showing of error.

In April 2018, the governor signed a budget bill, S. 7507/A. 9507, that made multiple changes to state law regarding sexual harassment. One section of the bill, Subpart B of Part KK, added a new section to the state’s arbitration laws that prohibits contractual provisions requiring arbitration of “any allegation or claim of an unlawful discriminatory practice of sexual harassment.” N.Y. C.P.L.R. § 7515(a)(2). This prohibition took effect on July 11, 2018. It is likely to be subject to court challenge, however, on the ground that it is preempted by the FAA. This claim might be supported by the U.S. Supreme Court’s ruling in AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011), which found that a statutory restriction on mandatory arbitration clauses in consumer contracts was preempted.

The experienced and knowledgeable employment attorneys at Phillips & Associates represent New York City employees, former employees, and job seekers. We advocates for our clients’ rights in claims for unlawful workplace practices like sexual harassment and sex discrimination. Please contact us today online or at (212) 248-7431 to schedule a free and confidential consultation to see how we can help you.

More Blog Posts:

Tech Company Employees Stage Walkout in New York and Around the World Over Company’s Handling of Sexual Harassment Complaints, New York Employment Attorney Blog, November 21, 2018

Advocates Worry About the Impact of Supreme Court Decision on New York Employees with Sexual Harassment Claims, New York Employment Attorney Blog, July 2, 2018

New York Legislature and New York City Council Enact New Sexual Harassment Laws, New York Employment Attorney Blog, June 27, 2018

Contact Information